1. Pair Trade: Long SAP - Short Dassault Systèmes
Tuesday, October 30th 2012
Companies Description Investment Case
SAP (SAP GY) Q3 2012 software license came ahead of consensus. SAP’s three
innovation growth drivers (HANA, Mobile and cloud) showed a good perfor-
mance. Quarterly results seem to demonstrate progress in its new product
areas, particularly in the cloud. Within software, Q3 weakness in EMEA was
offset by Americas. The company raised its 2012 SSRS revenue growth guidan-
ce by 50bps to the range 10.5% to 12.5% (including contribution from Success-
Factors and Ariba). SAP continues to build backlog at a significant pace.
SAP will host its European user event SAPPHIRE in Spain on November 13-16th.
Market Price Data
Higher market multiples could be justified if the company can generate value
SAP (SAP GY)
through cross-selling core products with new products into its large installed
Last Price (€) 56.030
base. The recent acquisition of Ariba is expected to unlock revenue synergies.
YTD Change 38.27% Key risks are related to technology and product cycles.
Mkt Cap (€ bn) 68.861
Dassault Systèmes (DSY FP) Dassault Systèmes (DSY FP) Q3 results came at the top of consensus earnings
Last Price (€) 82.050 expectations, but the topline growth seems to be slowing. Management gui-
YTD Change 32.50% ded towards a further slowdown in Q4, probably reflecting tougher macro
Mkt Cap (€ bn) 10.274 headwinds, mainly in Europe. Near-term, the company could have some pro-
Source: Bloomberg
duct cycle headwinds that it needs to manage (e.g. the SolidWorks 2013 relea-
se cycle with new functionalities). As a consequence, growth rates across
Analyst Recommendations some if its products could be volatile over the next few quarters.
Nevertheless, Dassault Systèmes is a high-quality, well positioned company in
SAP (SAP GY)
Sells
Holds
the software sector. It’s got an above-average cash generation ability and a
defensive revenue mix. New acquisitions could also support earnings.
Buys
Sells The SAP (SAP GY) / Dassault Systèmes (DSY GY) ratio has a current value of
Systèmes
Dassault
(DSY FP)
Holds
0.683. We will define as our targets 0.714 (+4.6%) and 0.736 (+7.8%). 0.66 will
be used as our stop-loss level (-3.4%).
Buys
0% 20% 40% 60% 80%
Technical Comment
(Source: Bloomberg)
Market Multiples
Ticker P/E 2013 EPS 2011/13 DY 2013
(Bloomberg) Est. CAGR Est. Est.
SAP GY 15.87 11.6% 1.70%
DSY FP 21.33 15.2% 1.11%
Source: Bloomberg
Next Report Date & Events
FT 2012 Jan. 23rd,
SAP GY Results 2013
Q4 2012
DSY FP Results Feb. 7th, 2013
Source: Companies' web site
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